Yota, a new kind of Russian company

MOSCOW, Russia — Yegor Ivanov, vice president of business development at Yota, remembers walking into the offices of South Korean electronics giant Samsung in 2007. “We didn’t even have business cards,” he said. “They didn’t see why they should talk to us. They thought, ‘Who are these people from Russia?’”

Four years later, Yota is leagues closer to nipping at the heels of Russia’s established telecoms giants, offering some of the most innovative products in the world of high-speed mobile broadband and internet services.

There is Yota Music, Russia’s answer to Pandora internet radio. In April, the company is set to launch Yota Play, modeled on Netflix movie streaming. It’s all built upon the company’s main product, 4G wireless broadband, for which it currently counts 750,000 customers.

“We all live with these things,” said Ivanov, who at 30 exemplifies the overwhelming youth of the company. Speaking of himself and his colleagues, he said: “We all have multiple telephones, an iPad, computers — the latest of everything. We know how the service should be and the right way to do it.”

Yota launched in June 2009, at first in Moscow and St. Petersburg before spreading to three other cities around Russia. Within five months, it had broken even. Last year, it reported revenue of $125 million.

The company immediately set itself apart, both inside Russia and globally, by its use of mobile WiMAX technology, which provides high-speed internet, including through the computer dongles that have become increasingly popular in recent years. The company poured $500 million into acquiring WiMAX technology, particularly from Samsung, which builds the base stations planted around the cities where the service is available. Soon it became one of the top users of the technology and announced plans to offer it in 15 more cities around Russia.

And just like that, plans changed. As WiMAX lost ground worldwide to Long-Term Evolution technology, better known as LTE, Yota decided it had to be flexible. The firm announced last May it would switch its technology base completely. “Following the global trend, we are seeking to give our clients the best solutions,” Yota said in a statement at the time.

In a country where big business has had a tough time shaking off the Soviet legacy of instituting years-long investment plans, the speed of Yota’s growth and change has raised many eyebrows.

Within two months, Yota had poured $20 million into developing LTE technology for its 4G coverage in Kazan, Russia’s third largest city. It may be moving too quickly for some. The technology is in place, but Russia lacks the regulation to cover it so the project has been frozen pending regulatory approval.

“Now, even though we’re a company of 1,000 employees, with a large network and subscriber base, we still have the dynamic and drive that we had at the very beginning,” Ivanov said. “We have a pro-Western mentality, versus the bureaucratic typical Soviet background.”

That can even be seen in its marketing. Its logo, a stick figure turned on its head, is simple and clean. Rather than splash out millions on additional advertising, in December Yota hosted the Yota Space festival in St. Petersburg, garnering global coverage for the exhibit of digital art and opening night concert, featuring indie favorite Hot Chip.

Yet despite its innovative feel and hipster approach, the company has not been immune to criticism. Last month, it raised its rates, turning off some users. Ivanov said the move was needed to stem a user base that was growing too quickly and to provide quality service to those who remained.

Its expansion strategy has seen it focus on countries with which Russia has good ties. After launching in Russia, it moved on to Belarus, the country run by hardline leader Alexander Lukashenko. Next, it went to Nicaragua, one of just a handful of nations that has recognized the independence of South Ossetia, the separatist Georgian republic that Tblisi and Moscow fought a bloody war over in August 2008. It has also recently launched in Peru. The financial crisis disrupted plans to clinch a deal with Venezuela.

“We understood it would be rather difficult to go to the U.S. or Europe,” Ivanov said, citing prejudice against Russian firms and protectionism on the part of big network operators.

Its global expansion has been aided by Russian Technologies, the unwieldy industrial behemoth that is fully owned by the Russian government. It holds a blocking stake of 25 percent plus one share in Yota. The rest belongs to Telconet Capital, a private investment fund. Ivanov said there were no plans for an IPO yet, but that would eventually be on the cards.